Congressional Energy Export Reform Contains Questionable Subsidy

October 19, 2015

An ongoing effort by Congress to lift a ban on U.S. crude oil exports is being sidetracked by an unrelated issue dealing with subsidies for the Maritime Security Fleet (MSF), a U.S.-flagged fleet of commercial vessels that was created in 1996 in response to the reliance on foreign-flagged vessels for military operations during that decade.

The Military gives preference to U.S.-flagged vessels when it seeks additional capacity but in the 1990s it had to rely on foreign-flagged vessels to fulfill its needs.

An argument for continued support to the MSF is that the U.S. cannot risk placing its sealift needs on foreign-flagged vessels whose countries of origin might oppose America's military actions.

Evidence of a lack of support from foreign-origin vessels to support U.S. operations is limited to a handful of instances.

Congress should consider whether this is a legitimate threat in an increasingly interconnected global shipping market before continuing to fund this program or increasing its funding.

Many of the countries that supply the vessels, labor and flagging are U.S. treaty allies or have strong relationship with the United States.

Furthermore, the actual causes of the American merchant fleet's decline must be examined before more taxpayer dollars are used to subsidize it. A major cause is that it is simply more expensive to operate a U.S.-flagged vessel than a foreign-flagged one.

Thus, if policymakers want to increase America's merchant marine base sustainably, they should look to make the market more competitive by reducing costly regulations and should treat the lift to the oil export ban on its own merits.